NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Federico Esposito

Department of Economics
Tufts University
8 Upper Campus Road
Medford, MA 02155
USA

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Institutional Affiliation: Tufts University

NBER Working Papers and Publications

February 2019General Equilibrium Effects in Space: Theory and Measurement
with Rodrigo Adão, Costas Arkolakis: w25544
How do international trade shocks affect spatially connected regional markets? We answer this question by extending shift-share empirical specifications to incorporate general equilibrium effects that arise in spatial models. In partial equilibrium, regional shock exposure has a shift-share structure: it is the average shock weighted by regional exposure shares in revenue and consumption. General equilibrium responses of employment and wages in each market are the sum, across all regions, of these shift-share measures times bilateral reduced-form elasticities determined by the economy's spatial links. We use this reduced-form representation of the model to efficiently estimate the bilateral elasticities exploiting exogenous variation in shock exposure across markets. Finally, we study the ...
 
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